According to InvestmentNews, The Leaders Group was ranked 34^th out of the top 50 independent broker-dealers in the nation. Sorted by total revenue growth, The Leaders Group was the sixth fastest-growing IBD in the nation. We would like to thank all our 1,200+ registered reps for their support and continued business, we appreciate each one of you. With over 26 years in continual operation, we pride ourselves on delivering the highest level of customer service we can to our financial professionals. The Leaders Group remains the largest broker-dealer in the world for variable life insurance offering services for wholesale organizations, insurance agents, and financial professionals. We wish you success for the second half of 2021, and please let us know how we can help support your efforts.

Below is a listing of links to articles we have written and pieces we have developed through the years. 

For Reference: Top Independent Broker-Dealers 2021 by InvestmentNews, April 26, 2021:

Top independent broker-dealers 2021

Complete Listing of Articles from Charles Arnold in Broker World 

Complete Listing of Articles from David Wickersham in Broker World

Complete Listing of Articles from Micah Hesting in Broker World

VUL Article Featured in InsuranceNewsNet, July 2019

Variable Universal Life: Evolving To Solve A Variety Of Client Needs

Other Pieces from The Leaders Group:

The Power of Tax-Free Core Brochure

Understanding the Illustration and IRR Report Guide for Financial Professionals

Prudential VUL Protector – Rise and Success

Overfunded VUL – The Greed Sale

The Top 5 Ways to Sell VUL

Check out our ad in 2Q NAILBA Perspectives Magazine: 

https://viewer.joomag.com/2021-q2/0890917001620149449?short&

Charles Arnold,
Chief Marketing Officer

It’s difficult to believe that we’re already heading into the third quarter of the year. It has been a tough year and a quarter for most, but in the U.S., we’re beginning to emerge from the dark clouds of the pandemic. The scars of lost time and lost loved ones won’t heal, but there are some things to look forward to as we head into the second half of 2021. More people are attending events, seeing family and friends, planning trips, and catching up on lost time. 

As far as the economy, the recovery is moving along, with GDP expected to recover to pre pandemic levels in 2021. However, the jobs numbers are still lagging what we saw before COVID. There are 7.6 million fewer Americans that have jobs now than pre-pandemic. The weekly unemployment claims have stayed relatively steady the past few weeks, and the most recent jobs reports have been disappointing when compared to economists’ consensus expectations after a great March report.^[1] That said, The Fed raised GDP expectations for 2021. In March, they were expecting 6.5% for 2021, and now the expectation is 7%.^[2] They have raised expectations a few times this year, which suggests they believe the economy is recovering faster than expected despite the plateau of the labor market recovery. 

Inflation has been higher than the central bank expected so far this year.^[3] Jay Powell said he feels it’s unlikely that we will return to 1970s-like inflation rates, but there is a lot of uncertainty as the economy opens up more and more. Fed officials are expecting 3.4% core inflation in 2021, more than a full percent higher than the 2% target. Much of the inflation concerns involve supply chain disruptions, namely in used cars, computer chips, the lack of people returning to the workforce, and various raw materials. Once those concerns are behind us, and pent-up demand is met, it is likely that some of the bigger price spikes may fade. That said, the Fed has raised inflation expectations because high prices have been more sticky than anticipated at the beginning of the year. Inflation is a real concern because it limits purchasing power – and sometimes profitability – as the workforce demands higher wages. While inflation has been larger than The Fed has expected, it’s important to remember that the inflation numbers appear larger because the year-over-year effect is bigger given that we saw some price drops in March and April of last year as demand for many goods faded.^[4] With the agreement of the new infrastructure bill, we may see even more government spending, but it isn’t clear how that will be funded. From the Wall Street Journal article, it sounds like it may be funded through multiple sources.^[1] It’s unclear what the effects of this will be long-term regarding inflation. That said, infrastructure spending typically has positive effects that are hard to quantify which is a reason Washington found a way to agree on the new bill. President Biden did say that he wouldn’t sign the bill if it was the only thing that comes to his desk – signaling an ultimatum if Democratic priorities aren’t also met – so it’s unknown what will actually come of this.

Overall, I think it’s encouraging what we’re seeing in the economy. We’ve hit a record number of job openings and workers are able to pick and choose what opportunities they want to take on.^[2] Although it makes it much more difficult to hire and retain employees, as we’ve seen at The Leaders Group, it is a good sign to see that employers are needing to increase capacity and bring on more people. Regarding the pandemic, because of increased vaccination and the progression to herd immunity, it no longer seems that strange to meet up with people without thinking about COVID. Although I realize (and the news is quick to remind us constantly) it’s premature to declare the pandemic over, life is starting to feel a lot more normal. I don’t think we’ll see the exact world we did in 2019, but I don’t necessarily believe that to be a bad thing.

Ben Tiller,
Principal Financial Officer

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^[1] Omeokwe, A. (2021, June 4). Hiring Picked Up in May but Lagged Behind Broader Recovery. The Wall Street Journal. https://www.wsj.com/articles/may-jobs-report-unemployment-rate-2021-11622764467. 

^[2] Politi, J., & Smith, C. (2021, June 16). Fed signals first rate rise will come in 2023. Subscribe to read | Financial Times. https://www.ft.com/content/0bf83e29-5ee2-415e-9e03-0edb38218bf3. 

^[3] Kiernan, P. (2021, June 22). Fed’s Powell Plays Down Inflation Threat. The Wall Street Journal. https://www.wsj.com/articles/feds-powell-set-to-testify-before-lawmakers-on-pandemic-programs-11624370400?mod=article_inline.

^[4] Dapena, K., & Santilli, P. (2021, June 22). Rising Inflation Looks Less Severe Using Pre-Pandemic Comparisons. The Wall Street Journal. https://www.wsj.com/articles/inflation-rates-fed-11624304034. 

^[5] Duehren, A., Peterson, K., & Siddiqui, S. (2021, June 24). Biden, Senators Agree to Roughly $1 Trillion Infrastructure Plan. The Wall Street Journal. https://www.wsj.com/articles/biden-senators-agree-to-roughly-1-trillion-infrastructure-plan-11624553972?mod=article_inline.

^[6] Bartash, J. (2021, June 8). U.S. job openings hit record 9.3 million – but more people are quitting than ever. MarketWatch. https://www.marketwatch.com/story/u-s-job-opening-leap-to-record-9-3-million-but-hiring-lags-well-behind-11623161366.

The past twenty years have brought many changes to the annuity marketplace. In 2001, indexed annuities paid commissions in the range of 15-25% and had surrender periods averaging 19 years. At that point in time, there were no state suitability rules, and these products were not regulated by FINRA or the SEC (they still do not fall under securities rules). In 2003, the National Association of Insurance Commissioners (NAIC) drafted the Suitability in Annuity Transactions Model Regulation. It required insurers and producers to make a reasonable effort to collect financial details and investment objectives for the purpose of having reasonable grounds for recommending annuity products to clients. In 2005, the National Association of Securities Dealers (NASD, now FINRA) issued Notice To Members 05-50 setting out broker-dealer responsibilities for supervising sales of unregistered equity-indexed annuities. At that point, the tide turned on indexed annuities.

Today, we have a variety of annuities available, and each has advantages and disadvantages. The latest entrant to the market is the registered index linked annuity (RILA), also known as a structured annuity, buffered annuity, variable indexed annuity or indexed variable annuity. These work by setting a floor or a buffer of protection. The RILA floor is the maximum percentage loss a customer is willing to absorb during a down market. Any losses beneath the floor are absorbed by the carrier. A buffer is the percentage loss that a customer does not wish to absorb. A customer is exposed to losses to the extent that the linked index losses exceed the buffer. The upside gain is often capped to the same extent that the downside loss is limited. 

Example: If the floor is 10% and the index declines by 15%, the annuity owner will absorb the first 10% loss, and the insurance company will absorb the remaining 5%.

Example: If the buffer is 10% and the index declines by 15%, the insurance company protects the annuity owner from the first 10%, and the owner absorbs a 5% loss to their annuity.

The upside potential is linked to an index and limited by a growth factor. This allows customers to participate in market growth without the risk of investing directly in the market. The only fees are associated with riders or early surrender or withdrawals. Like other annuities, the customer can select from a variety of payout options, depending on their needs.

Numerous carriers offer RILAs. Some are Brighthouse, Great American, Lincoln, Athene, Nationwide and Lincoln. Micah Hesting has written articles about most of the RILA products that are available, and those may be accessed in our Word on the Street archive.

In the investment risk spectrum, RILAs are higher risk than indexed annuities but lower than variable annuities. Inflation risk and interest rate risk should also be considered in recommending annuities. 

Annuity Types in Ascending Order of Investment Risk

Fixed annuity:

Customers receive a guaranteed interest rate over the time period specified by the payout option.

Fixed-indexed annuity:

Customers receive a guaranteed interest rate as well as additional returns if the linked index increases in value. Payments continue over the time period specified by the payout option.

Registered index-linked annuity:

Returns are not guaranteed, but rather are linked to a stock market index with capped gains and limited losses. Often recommended if the customer has 5-7 years to retirement or is already retired.

Variable annuity:

Gains and losses are tied directly to the underlying investment portfolio, which can be equity and/or fixed-income funds. Customers have no protection from downside loss, no cap on upside gain and no guaranteed return, unless customers purchase a rider, such as a guaranteed minimum income benefit (GMIB) rider.

RILA sales were $8.3 billion in the fourth quarter of 2020, a 68% jump from fourth quarter 2019 and 33% higher than the $6.3 billion recorded in third quarter 2020. In 2020, RILA sales were $24 billion, up 37% from 2019 sales. RILA sales represented nearly a quarter of all VA sales in 2020, according to preliminary results from the Secure Retirement Institute® (SRI®) U.S. Individual Annuity Sales Survey.

According to the same SRI® study, in the fourth quarter, fixed indexed annuity (FIA) sales were $14.3 billion, down 15% compared with fourth quarter 2019 results. After record-breaking sales in 2019, FIA sales fell 24% to $55.7 billion in 2020.

At The Leaders Group, $79 million of RILA premium were sold in 2020. That compares to $85 million of variable annuity premium and $62 million of indexed annuity premium.Remember, all annuities are long-term products. Annuities are complex products, and each type has advantages and disadvantages. Registered index linked annuities and variable annuities have a risk of substantial loss of principal and related earnings. Despite the risks and complexities, annuities may have a place in your customer’s retirement plan.

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Jane Riley
Chief Compliance Officer

Compensation Reporting

We understand that you might need to access your compensation statements outside of the LEADERSlink platform. We are excited to announce that we have enabled the enhancement to your compensation reporting that now allows you to print and/or save your weekly reports as a PDF. 

Training material is now available to assist you with using this enhancement. Your access to training material has already been sent via email from The Leaders Group trainer@mindflash.com.

Please note, there is the possibility the message might have been delivered to your Spam folder. We suggest you whitelist the trainer@mindflash.com email address to ensure you receive access to the Leaders Group University training material. Contact support@leadersgroup.net if you did not receive this invite.

Important Tax Updates

The federal tax filing deadline has been extended for individual tax returns until May 17th. If you are getting a refund, the IRS encourages you to file now. This extension does not apply to estimated tax deadlines or business tax returns.

The IRS has also reintroduced tax form 1099-NEC as the new way to report self-employment income instead of form 1099-MISC which has traditionally been used. This was done to help clarify the separate filing deadlines with form 1099-MISC and the new 1099-NEC form which will be used starting with the 2020 tax year.

Beginning with the 2020 tax year, the IRS has required business taxpayers to report non-employee compensation on the new 1099-NEC instead of on 1099-MISC. Businesses need to use this form if they have made payments totaling $600 or more to a non-employee, such as independent financial professionals.

The Leaders Group and TLG Advisors sent this new tax form to you back in January if you were paid $600 or more in compensation within the 2020 tax year.

Please contact the Compensation team at compensation@leadersgroup.net if you need a copy of tax form 1099-NEC.

Account Form Updates

You will notice we have made some changes to our account forms, one of the biggest changes is the name of the individual New Account Investment Profile. It has now been named Investment Account Profile, with this change it now allows you to use this not only for any new accounts you open but also for any accounts you plan to submit an update. 

Another change with this form is within the ‘Product Type’ section, we have added a checkbox for Registered Index-Linked Annuity. The Leaders Group has decided on this as the official name of the product where you may have heard it being called a buffer annuity or even a variable indexed annuity. With this new product type, there is now a worksheet specific to the registered index-linked annuity so please be on the lookout for that form also since it is a requirement when submitting new business for this type of product. Lastly with all of our forms we have added a code to the bottom right corner of every page you’ll notice on the Investment Account Profile it’s labeled TLG.ACCT.InvestmentAccountProfile.03032021. Going forward we are including a code like this not only on our account forms but on all documents issued by us. This new code is going to be recognized as documents are loaded into LEADERSlink to catalog them automatically so that we can then pull these documents via on-demand reporting for you and for regulatory inquires. 

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David Francis
Principal Operations Officer